Zambia Must Boost Revenue and Improve Fiscal Governance to Spur Economic Growth: World Bank Report

The report highlights Zambia's fiscal challenges and offers strategic recommendations for unlocking sustainable growth.

Public Finance Review emphasizes the need for reforms in public investment management and state-owned enterprises to drive sustainable growth and reduce poverty.

A new Public Finance Review (PFR) report, "Strengthening Fiscal Governance for Transformative Public Sector Investments," underscores the urgent need for Zambia to enhance revenue mobilization and improve fiscal governance. The report calls for comprehensive reforms in public investment management and state-owned enterprises (SOEs) to promote economic transformation and alleviate poverty.

The report highlights Zambia's fiscal challenges and offers strategic recommendations for unlocking sustainable growth. According to the World Bank's Country Manager for Zambia, Achim Fock, the country has made notable progress in debt restructuring and macro-fiscal management. However, he emphasized that stronger fiscal governance and more efficient use of resources are critical to building a resilient economy that benefits all Zambians, especially the most vulnerable.

Key Challenges and Opportunities

The report identifies several key challenges that hinder Zambia's economic potential. While tax collection is stable, it lags behind regional averages due to an over-reliance on the mining sector, large tax expenditures, and inefficiencies in VAT and customs administration. Inefficient project execution and poor data management have caused delays and waste in public investments, underscoring the need for improved coordination and transparency.

State-owned enterprises (SOEs) pose another significant challenge. Many of Zambia's SOEs are unprofitable, adding a fiscal burden to the government. The report suggests that strengthening governance and accountability within SOEs is crucial to improving their performance and reducing the financial strain they impose.

Unlocking Fiscal Space for Investments

The PFR also emphasizes the potential for Zambia to leverage its natural resources to create fiscal space for essential investments in infrastructure, education, and healthcare. The government's commitment to macro-fiscal reforms, supported by international partners like the World Bank, is a strong foundation for economic transformation. Achieving the goals of Zambia's Eighth National Development Plan (8NDP) will be key to realizing these ambitions.

Recommendations for Fiscal Reforms

The report recommends several measures to strengthen Zambia's fiscal governance, including:

Improving tax collection and modernizing revenue systems through digitalization.

Enhancing data governance and transparency in public investment projects.

Establishing a unified legal framework for state-owned enterprises to improve their accountability and performance.

According to World Bank Senior Economist for Zambia, Albert Pijuan, boosting domestic revenue growth, addressing inefficiencies in SOEs, and investing in critical infrastructure are essential steps toward creating lasting improvements in the lives of Zambians.

World Bank Support

The World Bank remains committed to supporting Zambia's efforts in fiscal reforms, providing both technical assistance and financial support to help the country achieve fiscal sustainability and inclusive growth. Through effective governance and strategic investments, Zambia can unlock its full economic potential and build a more resilient future for its citizens.